HOOKER v. THE CITADEL SALISBURY LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

SONYA HOOKER, SYBIL RUMMAGE, )

DONNA DEAL, KENNETH MICHAEL )

DEAL, and BETTY DEAL, )

individually and on behalf of )

a class of those similarly )

situated, )

)

Plaintiffs, )

)

v. ) 1:21-cv-00384

)

THE CITADEL SALISBURY LLC, )

SALISBURY TWO NC PROPCO LLC, )

ACCORDIUS HEALTH LLC, THE )

PORTOPICCOLO GROUP, LLC, )

SIMCHA HYMAN, and NAFTALI )

ZANZIPER, )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

THOMAS D. SCHROEDER, Chief District Judge.

This class action lawsuit seeks economic and emotional

distress damages arising out of alleged nursing home understaffing

prior to and through the COVID-19 pandemic. Plaintiffs are

residents of The Citadel Salisbury nursing home: Sybil Rummage,

along with her sponsor, Sonya Hooker; and Betty Deal, along with

her sponsors Donna Deal and Kenneth Michael Deal. Defendants, The

Citadel Salisbury, LLC (“The Citadel”); Salisbury Two NC Propco,

LLC; Accordius Health, LLC (“Accordius”); The Portopiccolo Group,

LLC (“Portopiccolo”); Simcha Hyman; and Naftali Zanziper, move to

dismiss (Doc. 24), or alternatively, to stay (Doc. 26) the action,

and to strike portions of the complaint (Doc. 28). Plaintiffs

have responded, opposing the motions (Docs. 30, 31, 32), and

Defendants have filed replies (Docs. 33, 34, 35).

Fifteen days after Defendants filed their reply brief in

support of their motion to dismiss, Plaintiffs moved to amend the

complaint to, among other things, add multiple parties and claims,

withdraw one claim, and augment certain allegations. (Doc. 36.)

Plaintiffs have responded, opposing the motion (Doc. 39), and

Defendants have replied (Doc. 43).

For the reasons set forth below, the motion to dismiss will

be granted in part and denied in part, Defendants’ motion to stay

and motion to strike will be denied as moot, and Plaintiffs’ motion

to amend will be granted in part and denied in part.

I. BACKGROUND

The basic facts alleged, as relevant to the motions before

the court and taken in the light most favorable to Plaintiffs, are

as follows:

Plaintiffs Sybil Rummage and Betty Deal (“Resident

Plaintiffs”) are residents of a nursing home facility located at

710 Julian Road. (Doc. 1 ¶¶ 7, 10-11.) When each Plaintiff

entered the facility prior to 2020, it was known as “Salisbury

Center” and was owned and operated by Genesis Healthcare

(“Genesis”). (Id. ¶ 31.) When they arrived at Salisbury Center,

Resident Plaintiffs executed admission agreements outlining the

care and basic services they should expect to receive. (Id. ¶ 60.)

Plaintiffs Sonya Hooker, Donna Deal, and Kenneth Michael Deal

(“Sponsor Plaintiffs”) are family members who sponsor and assist

the Resident Plaintiffs. (Id. ¶¶ 6, 8-9.)

On February 1, 2020, Salisbury Center was sold, and

operational control was transferred to The Citadel. (Id. ¶ 26.)

The services and care at Salisbury Center had deteriorated as

Genesis fought financial trouble (id. ¶ 32), and conditions grew

worse once The Citadel took over (id. ¶ 37). Residents experienced

various problems from alleged chronic understaffing as part of the

Defendants’ business model, such as failures to provide necessary

medication and care to the residents and to adequately communicate

with sponsors. (Id. ¶¶ 75-77, 121, 123, 144-148, 240.) Plaintiffs

suffered general emotional distress because of these failures.

(Id. ¶¶ 121, 125, 161, 174.) According to the Centers for Medicare

and Medicaid Services (“CMS”), during the time of The Citadel’s

ownership, the quality rating of the facility declined from one to

zero out of five stars. (Id. ¶ 43.) The Citadel was eventually

“subject to more frequent inspections, escalating penalties, and

potential termination from Medicare and Medicaid” as part of the

state’s “Special Focus Facility” program for nursing home

facilities with a “history of serious quality issues.” (Id. ¶ 41.)

The Citadel is a limited liability company organized under

North Carolina law and holds a license with the State of North

Carolina, Department of Health and Human Services, Division of

Health Services Regulation, to operate as a for-profit combination

skilled nursing facility and adult care home. (Id. ¶ 11.)

Defendant Salisbury Two NC Propco, LLC is a limited liability

company organized under North Carolina law and owns the property

where the facility is operated. (Id. ¶ 13.) Defendant Accordius

is a limited liability company organized under the laws of the

State of New York and provides “management” services to The

Citadel. (Id. ¶¶ 14-15.) Portopiccolo is a limited liability

company organized under New Jersey law and provides “back office

services” to The Citadel. (Id. ¶¶ 16-17.) The sole members and

owners of all limited liability companies involved are Simcha Hyman

and Naftali Zanziper. (Id. ¶¶ 18-20.)

Beginning when The Citadel assumed operations, Plaintiffs

allege, The Citadel was purposefully and consistently staffed

inadequately such that it was unable to provide the services

required for the safety and well-being of its residents.

(Id. ¶ 58.) Plaintiffs’ original complaint brings four claims for

relief: (1) breach of contract, (2) violation of the North Carolina

Unfair Trade Practices Act (“UDTPA”), N.C. Gen. Stat. § 71–1.1.,

(3) breach of fiduciary duty, and (4) negligent infliction of

emotional distress (“NIED”). (Id. ¶¶ 207-253.) The proposed

amended complaint seeks to withdraw the breach of fiduciary duty

claim, add a negligence claim, and add several parties and other

Defendant-related facilities. Plaintiffs seek damages reflecting

payments they made and disgorgement of Medicare or Medicaid

payments made on their behalf “reflecting the reasonable value of

the staffing hours they were entitled to have receive and did not

receive.” (Doc. 1 ¶ 2.) Plaintiffs allege class action treatment,

citing “hundreds” of plaintiffs and 15 common questions that

include the following: the use of “uniform policies and systems”

of management; allegedly deceptive advertising and statements;

“[w]hether the law requires the facility to maintain staffing at

a reasonable across-the-board level” which is alleged to be 4.1

hours per resident day of “total nurse staffing” and 0.75 hours

per resident day of “Registered Nurse staffing”; and damages. (Id.

¶ 202.)

Defendants moved to dismiss the complaint, or in the

alternative to stay, and to strike certain allegations of the

complaint. Plaintiffs responded with oppositions and filed a

motion to file an amended complaint that purports to shore up

deficiencies of the original complaint and to expand this action.

Defendants oppose any further amendment.

All motions are fully briefed and ready for consideration.

II. ANALYSIS

A. Motion to Amend and Motion to Dismiss

Plaintiffs’ motion to amend, filed on the heels of the

briefing of Defendants’ motion to dismiss, seeks to amend the

complaint to (1) add Ms. Kilgo and her sponsor and adult daughter,

Ms. Lee, as Plaintiffs; (2) join Myers Park and Myers Park Propco,

LLC, as Defendants; (3) “provide greater factual and legal support”

that all defendants “should be held jointly and severally liable

due to their direct involvement on the facts”; (4) expand the

proposed class to all thirty-seven facilities owned and operated

by Hyman and Zanziper; (5) add claims for negligence and equitable

relief; and (6) withdraw their fiduciary duty claim.1 (Doc. 36.)

Plaintiffs argue the motion to amend should be granted because it

“is made in good faith, will assist in ensuring litigation of the

material issues, and is neither frivolous nor will cause any

material prejudice.”2 (Doc. 37.) Defendants argue the motion

should be denied because it is futile, in bad faith, and unduly

prejudicial. (Doc. 39.)

Where a complaint is properly amended, it supersedes the prior

complaint and becomes the operative pleading. Fawzy v. Wauquiez

Boats SNC, 873 F.3d 451, 455 (4th Cir. 2017) (“Because a properly

filed amended complaint supersedes the original one and becomes

the operative complaint in the case, it renders the original

1 Plaintiffs have also removed some of the terms Defendants label as

“inflammatory” in their motion to strike, such as “cut rate” medical

supplies and “reckless” cost-cutting measures. (See Doc. 29 at 4-5.)

2 A party seeking amendment from the court “must state good cause.”

L.R. 7.3(j). Plaintiffs claim good cause exists because Ms. Kilgo and

her family did not seek counsel until June 2021 and “it took a period

of time . . . to obtain all of the relevant medical, personal and nursing

home chart records . . . before they could sue.” (Doc. 43 at 8.)

complaint of no effect.” (citation omitted)). But where a

plaintiff moves to amend a complaint in response to a motion to

dismiss, the motion to amend has the potential to either frustrate

or moot the resolution of the pending motion to dismiss. The court

therefore must exercise some level of discretion in deciding which

motions to resolve. Because these two motions are fully briefed

and share the same standard of review in part, the court will

consider all motions and will not deem the motion to dismiss mooted

by the requested amendment.

Pursuant to Federal Rule of Civil Procedure 15(a)(1)(B), a

plaintiff may amend the complaint once as a matter of course within

21 days after the earlier of (1) service of a responsive pleading

or (2) service of a motion under Rule 12(b), (e), or (f). After

that period, a party may amend only with either the opposing

party’s written consent or the court’s leave. Fed. R. Civ. P.

15(a)(2). The court therefore has the discretion to entertain the

pending motion to dismiss, or to consider the motion to amend and

then permit the parties to re-brief the motion to dismiss.

Foman v. Davis, 371 U.S. 178, 182 (1962) (noting that “the grant

or denial of an opportunity to amend is within the discretion of

the District Court”). And while district courts have discretion

to grant or deny a motion to amend, the Fourth Circuit has

interpreted Rule 15(a) to provide that “leave to amend a pleading

should be denied only when the amendment would be prejudicial to

the opposing party, there has been bad faith on the part of the

moving party, or the amendment would have been futile.” Laber v.

Harvey, 438 F.3d 404, 426 (4th Cir. 2006) (citation omitted);

Foman, 371 U.S. at 182 (same).

“[I]f the proposed change advances a claim or defense that is

legally insufficient on its face, the court may deny leave to

amend.” Williams v. Little Rock Municipal Water Works,

21 F.3d 218, 225 (8th Cir. 1994) (citing Charles A. Wright & Arthur

Miller, Fed. Prac. & Proc.: Civil, § 1487, at 637 (1991))

(quotation omitted and alterations adopted); see Joyner v. Abbott

Labs, 674 F. Supp. 185, 190 (E.D.N.C. 1987) (same). “To determine

whether a proposed amended complaint would be futile, the Court

reviews the revised complaint under the standard used to evaluate

a motion to dismiss for failure to state a claim.” Amaya v. DGS

Construction, LLC, 326 F.R.D. 439, 451 (D. Md. 2018) (citing Katyle

v. Penn National Gaming, Inc., 637 F.3d 462, 471 (4th Cir. 2011)).

Thus, “[a] motion to amend a complaint is futile ‘if the proposed

claim would not survive a motion to dismiss.’” Pugh v. McDonald,

266 F. Supp. 3d 864, 866 (M.D.N.C. 2017) (quoting James Madison

Ltd. v. Ludwig, 82 F.3d 1085, 1099 (D.C. Cir. 1996)).

A Rule 12(b)(6) motion to dismiss is meant to “test[] the

sufficiency of a complaint” and not to “resolve contests

surrounding the facts, the merits of a claim, or the applicability

of defenses.” Republican Party of North Carolina v. Martin, 980

F.2d 943, 952 (4th Cir. 1992). To survive such a motion, “a

complaint must contain sufficient factual matter, accepted as

true, to ‘state a claim to relief that is plausible on its face.’”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic

Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In considering a

Rule 12(b)(6) motion, a court “must accept as true all of the

factual allegations contained in the complaint,” Erickson v.

Pardus, 551 U.S. 89, 94 (2007) (per curiam), and all reasonable

inferences must be drawn in the non-moving party’s favor, Ibarra

v. United States, 120 F.3d 472, 474 (4th Cir. 1997).

Rules 12(b)(6) and 15 should be balanced against Federal Rule

of Civil Procedure 8(a)(2), which provides only that a complaint

contain a “short and plain statement of the claim showing that the

pleader is entitled to relief.” Rule 12(b)(6), and thus Rule 15,

protect against meritless litigation by requiring sufficient

factual allegations “to raise a right to relief above the

speculative level” so as to “nudge[] the[] claims across the line

from conceivable to plausible.” Twombly, 550 U.S. at 570 (2007);

see Iqbal, 556 U.S. at 678 (2009). When considering a Rule

12(b)(6) motion and opposition to a Rule 15 motion to amend, the

court “need not accept as true unwarranted inferences,

unreasonable conclusions, or arguments.” Giarratano v. Johnson,

521 F.3d 298, 302 (4th Cir. 2008).

1. Immunity Defense

Defendants first argue that the complaint should be

dismissed, and any amendment disallowed, on the ground that the

claims for understaffing are barred by the North Carolina Emergency

or Disaster Treatment Protection Act (“EDTPA”). N.C. Gen. Stat.

§§ 90-21.130 to 90-21.134.3

The purpose of the EDTPA is to “promote the public health,

safety, and welfare of all citizens by broadly protecting the

health care facilities . . . from liability that may result from

treatment of individuals during the COVID-19 public health

emergency under conditions resulting from circumstances associated

with the COVID-19 public health emergency.” N.C. Gen. Stat. § 90-

21.131. The EDTPA shields health care facilities from liability

from their “decisions or activities in response to or as a result

of the COVID-19 pandemic,” “during the period of the COVID-19

emergency declaration,” if such healthcare services are provided

in “good faith.” N.C. Gen. Stat. § 90-21.133. To overcome

immunity, plaintiffs may allege the actions “were caused by . . .

gross negligence, reckless misconduct, or intentional infliction

of harm.” Id. However, the statute precludes claims of gross

3 Defendants earlier moved to stay these proceedings pending the result

of a North Carolina state court case concerning the constitutionality

of the EDTPA. (See Doc. 26; Docket Sheet, Howze v. Treyburn Rehab. Ctr.,

LLC, No. 21-272 (N.C. Ct. App. 2022), available at

https://appellate.nccourts.org/dockets.php?court=2&docket=2-2021-0272-

001&pdf=1&a=0&dev=1.) That case has since been dismissed following a

settlement, and Defendants have withdrawn their motion. (Doc. 56.)

negligence, reckless misconduct, or intentional infliction of harm

based on shortages of staff or other resources.4 Id.

Plaintiffs allege that the understaffing began once Hyman and

Zanziper assumed control of the facility on February 1, 2020.

(Doc. 1 ¶¶ 37-38, 58.) On March 10, 2020, Governor Roy A. Cooper

declared a State of Emergency “based on the public health emergency

posed by COVID-19.” Exec. Order No. 116 (2020). No COVID-19

emergency declaration was in place from February 1 through

March 9, 2020. Thus, because Plaintiffs allege harms resulting

from understaffing that occurred before the onset of the COVID-19

emergency declaration, Defendants’ statutory immunity arguments

based on the EDTPA are premature at this stage.

Defendants also argue that Plaintiffs’ claims are barred by

Session Law 2020-89, entitled “An Act to Provide Limited Immunity

from Liability for Claims Based on Transmission of Coronavirus

Disease 2019 (COVID-19).” N.C. Gen. Stat. §§ 99E-70 - 99E-72.

Session Law 2020-89 shields individuals, corporations, and other

legal entities from “claim[s] for relief arising from any act or

omission alleged to have resulted in the contraction of COVID-19,”

4 Plaintiffs contend that Portopiccolo “does not fit in the category [of]

health care provider under § 90-21.133(a) and § 90-21.132(7)” and would

thus not be entitled to immunity under the statute. (Doc. 30 at 9.)

This argument is unpersuasive. It is undisputed that The Citadel is a

health care provider, and Plaintiffs’ argument for liability for the

non-facility Defendants is premised on their “legal responsibility for

the acts or omissions of a health care provider” as clearly covered under

the statute. See N.C. Gen. Stat. § 90-21.133(a).

unless the act or omission constitutes “gross negligence, willful

or wanton conduct, or intentional wrongdoing.” N.C. Gen. Stat.

§ 99E-71(a). This immunity “applies to claims arising no later

than 180 days after the expiration or rescission of Executive Order

No. 116 issued March 10, 2020.” N.C. Gen. Stat. § 99E-72.

Plaintiffs have submitted affidavits of Citadel staff and

residents and their families that support their claims and are

explicitly relied upon (Docs. 12-1 through 13-26), and their

authenticity is not challenged. Ordinarily, the court cannot

consider such factual proof at the motion to dismiss stage, but it

may consider documents outside the pleadings without converting a

motion to dismiss into one for summary judgment if those documents

are “integral to and explicitly relied on in the complaint” and

their authenticity is unchallenged. Copeland v. Bieber, 789 F.3d

484, 490 (4th Cir. 2015) (quoting Phillips v. LCI International,

Inc., 190 F.3d 609, 618 (4th Cir. 1999)); see, e.g., Luy v.

Baltimore Police Department, 326 F. Supp. 2d 682, 688 (D. Md.

2004), aff’d, 120 F. App’x 465 (4th Cir. 2005) (“The defendants

have attached a number of documents to their motion to dismiss,

including . . . several affidavits from [defendant’s]

employees. . . . [T]he court may consider these to the extent that

they contain any of the defamatory statements relied on in the

plaintiff’s complaint.”); Ohio Valley Environmental Coalition v.

Caperton, 500 F.Supp.3d 488, 493 n.1 (S.D.W. Va. 2020) (“[T]he

Court finds that the [supporting] affidavit is incorporated into

the Complaint by reference, that it is integral to the Complaint,

and that the Plaintiffs did not challenge its authenticity.”).

That is the case here. (See, e.g., Doc. 1 at 5 n.4, 6 n.5, 13

n.16, 24 n.42, 28 n.48, 31 n.57, 32 n.60-62, 33 n.63, 34 n.68-71,

36 n.76-80.)

As Defendants contend, the affidavits appear to demonstrate

that Plaintiffs’ claims substantially concern the impact of the

COVID-19 pandemic on residents, staffing, and supplies on The

Citadel. (See Doc. 33 at 2-3 (quoting Plaintiffs’ affidavits).)

And Plaintiffs appear to concede that harms “resulting from

circumstances associated with the COVID-19 public health

emergency” would be protected by the COVID-19 immunity bill.

N.C. Gen. Stat. § 90-21.131 (See Doc. 30 at 7-9.) However, the

affidavits also contain allegations of harms that could be

unrelated to the COVID-19 pandemic. (See, e.g., Doc. 13-15 ¶¶ 6-

12 (resident assaulted in her room); Doc. 13-16 ¶ 8 (resident

wearing dirty clothes, with piled-up laundry, and with meals up to

two hours late before the COVID-19 lockdown); Doc. 13-19 ¶ 7

(resident laundry issues and lack of supplies in February 2020

before COVID-19 lockdown); Doc. 13-26 ¶¶ 7-8 (resident with severe

bedsores first discovered in January 2020).) Critically,

Plaintiffs also allege in their complaint that many of the problems

with the facility “occurred at the Citadel in February 2020 before

the advent of COVID-19 at the Facility.” (Doc. 1 ¶ 38; but see

Doc. 1 ¶¶ 39, 97, 175 (complaining of issues related to COVID-

19).) Thus, taking these allegations as true, as the court must

at this preliminary stage, a motion to dismiss on this basis must

be denied.

2. Breach of Contract

Plaintiffs’ first cause of action in the complaint, repeated

in substantively the same form in the proposed amended complaint,

is for breach of contract between the Resident Plaintiffs and The

Citadel. (Doc. 1 ¶¶ 207-221; Doc. 36-1 ¶¶ 237-254.) Resident

Plaintiffs allege they had either an express or, in the

alternative, an implied-in-fact contract with The Citadel.

Plaintiffs further contend this contract was breached when The

Citadel experienced chronic understaffing resulting in harm to the

residents.

Under North Carolina law, the essential elements of a breach

of contract claim are the existence of a valid contract and a

breach of its terms. Eli Research, Inc. v. United Communications

Group, LLC, 312 F. Supp. 2d 748, 755 (M.D.N.C. 2004) (citing Poor

v. Hill, 530 S.E.2d 838, 843 (N.C. Ct. App. 2000)). A valid

contract requires an agreement and sufficient consideration. See

Creech ex rel. Creech v. Melnik, 556 S.E.2d 587, 591 (N.C. Ct.

App. 2001). As such, to state a claim, Resident Plaintiffs must

plausibly allege that the parties had an agreement.

A contract implied-in-fact “arises where the intention of the

parties is not expressed.” Intercollegiate Women’s Lacrosse

Coaches Ass’n v. Corrigan Sports Enterprises, Inc.,

546 F. Supp. 3d 440, 450 (M.D.N.C. 2021) (quoting Snyder v.

Freeman, 266 S.E.2d 593, 602 (N.C. 1980)). Instead, the agreement

between the parties “is implied or presumed from their acts, or,

as it has been otherwise stated, where there are circumstances

which, according to the ordinary course of dealing and the common

understanding of men, show a mutual intent to contract.” Id. A

contract implied-in-fact may be found where “a contract lapses but

the parties to the contract continue to act as if they are

performing under a contract,” and neither party “clearly and

manifestly indicates, through words or through conduct, that it no

longer wishes to continue to be bound” by the terms of the lapsed

agreement. Celanese Acetate, LLC v. Lexcor, Ltd., 632 F. Supp. 2d

544, 550 (W.D.N.C. 2009) (citation omitted). In evaluating a

contract implied-in-fact on a Rule 12(b)(6) motion, “[w]hether

mutual assent is established and whether a contract was intended

between parties are questions for the trier of fact.” Snyder, 266

S.E.2d at 602.

Here, Plaintiffs allege that they had either an express or an

implied-in-fact contract with The Citadel for nursing home care

and services in exchange for payment. (See, e.g., Doc. 1 ¶¶ 207-

221.) They allege that the terms of the agreement, whether express

or implied, include the promise to maintain sufficient staffing

and “abide by relevant rules, laws, and standards.” (Id.)

Defendants move to dismiss the breach of contract claim on the

ground that Plaintiffs’ prior residency agreement with Genesis

does not contain provisions promising to maintain “any specific

staffing levels” or to “abide by relevant rules, laws, and

standards.” (Doc. 25 at 7-9.) Defendants also argue that Resident

Plaintiffs cannot allege they had an implied-in-fact contract, in

the alternative, as the existence of a written agreement between

Genesis and the Resident Plaintiffs bars any claim of an implied-

in-fact contract. Defendants further argue that if no express

contract exists, there is no action on their or the Resident

Plaintiffs’ part that constitutes an offer or acceptance to show

mutual assent to an implied-in-fact contract. (Doc. 33 at 6-7.)

Whether express or implied, there is no dispute that

Plaintiffs have alleged a valid agreement. Resident Plaintiffs

paid thousands of dollars each month in exchange for the ability

to reside at The Citadel. The resident admission agreements and

accompanying forms executed upon Resident Plaintiffs’ admission to

the nursing home facility contain extensive detail about the

parties’ respective obligations. In addition to those provisions,

compliance with regulations in effect at the time the contract is

signed may also be a term of an agreement. See Sanders v. State

Personnel Commission, 677 S.E.2d 182, 187 (N.C. Ct. App. 2009)

(“[A]ny relevant regulations . . . as well as statutory and

constitutional provisions must be read into any contract that might

exist between plaintiffs and their employers.”); Mullen v. Saber

Healthcare Group, LLC, No. 5:18-CV-317-BO, 2020 WL 5118038, at *5

(E.D.N.C. Aug. 31, 2020) (“A party’s compliance with regulations

can constitute a term of an otherwise valid contract.”

(citing Sanders, 677 S.E.2d at 187)). Plaintiffs allege a valid

express contract, and they plausibly allege that The Citadel

contractually committed itself to maintaining adequate staffing

levels for the proper care of their residents within the structure

of North Carolina regulations.5

Furthermore, Resident Plaintiffs’ breach of contract claim

does not rest solely on an alleged failure to comply with North

Carolina regulations. Rather, both parties agree that The Citadel

was contractually obliged to provide each resident with necessary

nursing, housekeeping, and personal care (see Doc. 25 at 7), and

the complaint alleges consistent staffing, medication, and

communication failures. Moreover, based on state inspections, the

complaint alleges a quality rating of zero out of five stars and

placement in the state’s “Special Focus Facility” program for

5 In the alternative, The Citadel’s continued care for the Resident

Plaintiffs in return for their payments clearly constitutes action

consistent with an implied-in-fact contract. See Ellis Jones, Inc. v.

W. Waterproofing Co., Inc., 312 S.E.2d 215, 218 (N.C. Ct. App. 1984)

(noting that an implied-in-fact contract exists by virtue of the parties’

conduct, rather than in any explicit set of words).

nursing homes with a “history of serious quality issues.” (See

e.g., Doc. 1 ¶¶ 41, 43, 50-51.) These facts, reasonably construed

in the light most favorable to Plaintiffs, state a plausible claim

for breach of contract.

3. North Carolina Unfair and Deceptive Trade Practice

Act

Plaintiffs’ second cause of action in both the complaint and

proposed amended complaint alleges that “Defendants engaged in one

or more unfair or deceptive acts or practices, or unfair methods

of competition, or in affecting commerce” in violation of the

UDTPA. (Doc. 1 ¶¶ 222-234; Doc. 36-1 ¶¶ 255-269.) Defendants

make multiple arguments to dismiss Plaintiffs’ UDTPA claim. Most

notably, they argue that a mere breach of contract is insufficient

to state a claim under the UDTPA. (Doc. 25 at 17-18.)

The UDTPA bars any “unfair or deceptive acts or practices in

or affecting commerce.” N.C. Gen. Stat. § 75-1.1. To sustain a

UDTPA claim, Plaintiff must show that: (1) Defendant committed an

unfair or deceptive act or practice, or an unfair method of

competition, that (2) was in or affecting commerce, which (3)

proximately caused actual injury to it. A breach of contract

alone, even if intentional, does not support a UDTPA claim. See

Wachovia Bank & Trust Co. v. Carrington Development Associates,

459 S.E.2d 17, 21 (N.C. Ct. App. 1995). Instead, “substantial

aggravating circumstances” must be present to maintain a UDTPA

claim. Branch Banking & Trust Co. v. Thompson, 418 S.E.2d 694,

700 (N.C. Ct. App. 1992) (quoting Bartolomeo v. S.B. Thomas, Inc.,

889 F.2d 530, 535 (4th Cir. 1989)).

Here, the complaint does not allege any facts which constitute

“substantial aggravating circumstances.” Plaintiffs merely allege

they did not receive what they bargained for under an express or

implied-in-fact contract. Plaintiffs’ attempts to allege

aggravating circumstances by reiterating statutory violations,

making conclusory statements about Defendants’ state of mind, and

appealing to mere puffery promising that Defendants’ “staff are in

the field continuously ensuring that our 5-Star service and Core

Values are maintained” falls short. (See Doc. 1 ¶¶ 50-51; Doc.

36-1 ¶¶ 60-61.) These are all insufficient to support a UDTPA

claim separate from the breach of contract. See Thompson, 418

S.E.2d at 700 (stating that “a mere breach of contract, even if

intentional, is not sufficiently unfair or deceptive to sustain

a[] [UDTPA] action”); see also Hookah Distributors, Inc. v. Avior,

Inc., 401 F. Supp. 3d 653, 659-60 (W.D.N.C. 2019) (noting that

under North Carolina law, “mere puffery” cannot form the basis of

fraud or UDTPA claims); cf. Verisign, Inc. v. XYZ.com LLC,

848 F.3d 292, 302-03 (4th Cir. 2017) (holding that “puffery or

bluster on which no reasonable consumer would rely” does not

satisfy the “false or misleading . . . representation” element of

the Lanham Act (citation omitted)).

As Plaintiffs have failed to plausibly allege a UDTPA claim,

the motion to dismiss claim two of the complaint against all

Defendants will be granted, and because Plaintiffs’ proposed

amended complaint offers no substantively different allegations,

the motion to amend as to this claim is denied as futile.

4. Negligent Infliction of Emotional Distress

Plaintiffs’ fourth claim of the original complaint, which is

the third claim of the proposed amended complaint, alleges that

The Citadel is liable for NIED under North Carolina law.

(Doc. 1 ¶¶ 246-53; Doc. 36-1 ¶¶ 270-277.) The elements of the

tort of NIED require that: “(1) the defendant negligently engaged

in conduct, (2) it was reasonably foreseeable that such conduct

would cause the plaintiff severe emotional distress . . ., and (3)

the conduct did in fact cause the plaintiff severe emotional

distress.” Johnson v. Ruark Obstetrics, 395 S.E.2d 85, 97 (N.C.

1990). “Severe emotional distress” means “any emotional or mental

disorder, such as, for example, neurosis, psychosis, chronic

depression, phobia, or any other type of severe and disabling

emotional or mental condition which may be generally recognized

and diagnosed by professionals trained to do so.” Wrenn v. Byrd,

464 S.E.2d 89, 92 (N.C. Ct. App. 1995) (citation omitted) (holding

that evidence of “moderate depression” diagnosed by a physician

was sufficient to establish severe emotional distress);

see Williams v. HomEq Servicing Corp., 646 S.E.2d 381, 384-85

(N.C. Ct. App. 2007) (plaintiffs’ uncorroborated testimony that

they suffered from chronic depression was insufficient to

establish a claim of severe emotional distress).

Here, Plaintiffs do not allege any specific facts to render

the requisite severe emotional distress plausible. For example,

Plaintiffs pleaded no facts showing that any Plaintiff sought

therapy or treatment for any psychiatric condition arising out of

The Citadel’s actions. See Swick v. Wilde, No. 1:10-CV-303, 2012

WL 3780350, at *30 (M.D.N.C. Aug. 31, 2012). Instead, Plaintiffs

merely allege that Ms. Hooker was “at her wit’s end,” and Donna

Deal, Mike Deal, and Ms. Rummage all dealt with general “distress.”

(Doc. 30 at 21; see Doc. 1 ¶¶ 118, 125, 174; Doc. 36-1 ¶¶ 127,

134, 183.) Temporary anxiety or distress, or more long-lasting

anger and frustration, is not sufficient to establish severe

emotional distress, and Plaintiffs have alleged no further facts

showing any “severe and disabling” mental or emotional condition.

See Ruark, 395 S.E.2d at 97.

Accordingly, the court will dismiss all claims of NIED against

The Citadel. And because Plaintiffs’ proposed amended complaint

offers no substantively different allegations, the motion to amend

as to this claim is denied as futile.

5. Breach of Fiduciary Duty

Plaintiffs’ third cause of action of the original complaint

alleges that Defendants breached a fiduciary duty to the Sponsor

Plaintiffs. (Doc. 1 ¶¶ 235-245.) But as Plaintiffs have withdrawn

this claim in their proposed amended complaint (Doc. 36-1), the

motion to amend will be granted and the motion to dismiss Sponsor

Plaintiffs’ breach of fiduciary duty claim will be denied as moot.

6. Joinder

Plaintiffs move to amend their complaint to join (1) Ms.

Kilgo, a resident of another Citadel-related facility, Myers Park,

and her sponsor and adult daughter, Ms. Lee, as Plaintiffs under

Rule 20; and (2) Myers Park and another limited liability company,

Myers Park Propco, LLC, as Defendants under Rule 20.

(Doc. 37 at 4-5.) Defendants argue that Plaintiffs’ attempted

joinder is improper because Federal Rule of Civil Procedure 20

“does not authorize a plaintiff to join defendants in a single

lawsuit when the plaintiff’s claims against the defendants are

unrelated.” (Doc. 39 at 18.) Plaintiffs’ response is largely

that the other nursing home is part of “the same enterprise” with

the “same defective staffing practices.” (Doc. 37 at 4.)

Plaintiffs do not contend that joinder is mandatory.

See Fed. R. Civ. P. 19. Therefore, the provisions of Rule 20

apply. Rule 20(a)(1) permits that a person may add as plaintiff

persons as to whom “they assert any right to relief jointly,

severally, or in the alternative with respect to or arising out of

the same transaction, occurrence, or series of transactions or

occurrences;” and “any question of law or fact common to all

plaintiffs will arise in the action.” Similarly, Rule 20(a)(2)

provides that a party may be joined as a defendant if “(A) any

right to relief is asserted against them jointly, severally, or in

the alternative with respect to or arising out of the same

transaction, occurrence, or series of transactions or occurrences;

and (B) any question of law or fact common to all defendants will

arise in the action.” “[A] court determining whether to grant a

motion to amend to join additional plaintiffs must consider both

the general principles of amendment provided by Rule 15(a) and

also the more specific joinder provisions of Rule 20(a).” Hinson

v. Norwest Financial South Carolina, Inc., 239 F.3d 611, 618 (4th

Cir. 2001). “The United States Supreme Court has articulated that

‘the impulse is toward the broadest possible scope of action

consistent with fairness to the parties; joinder of claims, parties

and remedies is strongly encouraged.’” Todd v. Cary’s Lake

Homeowners Ass’n, 315 F.R.D. 453, 456 (D.S.C. 2016) (quoting

United Mine Workers of America v. Gibbs, 383 U.S. 715, 724 (1966)).

Further, the Fourth Circuit has explained that “Rule 20 gives

courts wide discretion concerning the permissive joinder of

parties.” Aleman v. Chugach Support Services, Inc., 485 F.3d 206,

218 n.5 (4th Cir. 2007).

The proposed amended complaint alleges claims by Ms. Kilgo

and Ms. Lee against a separate Citadel-related facility, Myers

Park, and a separate LLC, Myers Park Propco, LLC. (Doc 36-1 ¶¶ 16-

17, 29-31, 240, 267, 292.) Plaintiffs contend that Ms. Kilgo’s

and Ms. Lee’s claims against Myers Park and Myers Park Propco, LLC

are common to those of the Plaintiffs in the original complaint

because they are premised on the claim that the Defendants

understaffed their facility as part of a common plan.

(Doc. 37 at 4-5.) But this contention fails because Plaintiffs’

claims do not “aris[e] out of the same transaction, occurrence, or

series of transactions or occurrences” as the other claims.

Fed. R. Civ. P. 20(a)(1)(A). While there is an allegation of

chronic understaffing by design, the understaffing, if

demonstrated, would only be evidence to support a claim that any

particular Plaintiff failed to receive the services contracted for

– that is, that he or she did not receive the proper care and

oversight by the nursing and other staff. Thus, any particular

Plaintiff’s claim does not arise out of the alleged fact of a plan

to understaff; rather, it would arise, if at all, based on the

actual staffing each resident received.6 Moreover, allowing

Plaintiffs’ claims would balloon this lawsuit to include some 37

facilities managed or operated by the various Defendants, and

6 Defendants also point out that Plaintiffs Kilgo and Lee allege conduct

occurring during a 90-day period beginning seven months after the onset

of the COVID-19 pandemic such that these claims may be barred by state

immunity law. (Doc. 39 at 5-6; Doc. 36-1 ¶¶ 209-224.) See N.C. Gen.

Stat. § 90-21.133 (“[A]ny health care facility . . . shall have immunity

from any civil liability for any harm or damages alleged to have been

sustained . . . as a result of the COVID-19 pandemic.”). Because the

court denies joinder of Ms. Kilgo and Ms. Lee, it need not reach this

contention.

including hundreds, if not more, individual residents, rendering

the litigation unmanageable. Contrary to Plaintiffs’ claim that

all claims are common because “a single defendant commonly manages

all of [the facilities] . . . or controls their finances, budgets,

vendor contracts, wages, and staffing,” (Doc. 37 at 14), allowing

amendment would actually merely create hundreds of individual

questions as to the service received by each resident. See Aleman,

485 F.3d at 218 n.5 (“The court has discretion to deny joinder if

it determines that the addition of the party under Rule 20 will

not foster the objectives of the rule, but will result in

prejudice, expense, or delay.” (citations omitted));

CineTel Films, Inc. v. Does 1-1,052, 853 F. Supp. 2d 545, 553–54

(D. Md. 2012) (finding joinder inappropriate in the copyright

infringement context where the alleged infringement “was committed

by unrelated defendants, through independent actions, at different

times and locations”); Hard Drive Productions, Inc. v. Does 1-188,

809 F. Supp. 2d 1150, 1164 (N.D. Cal. 2011) (“[P]ermitting joinder

in this case would undermine Rule 20(a)’s purpose of promoting

judicial economy and trial convenience because it would result in

a logistically unmanageable case. . . . “[It] would force the

Court to address the unique defenses that are likely to be advanced

by each individual Defendant, creating scores of mini-trials

involving different evidence and testimony.”).

Therefore, Plaintiffs’ motion to amend the claims to add

Ms. Kilgo and Ms. Lee as Plaintiffs, and Myers Park and Myers Park

Propco, LLC as Defendants, pursuant to Rule 20 will be denied.

7. Joint and Several Liability

Plaintiffs’ claims are brought against The Citadel, with whom

Resident Plaintiffs contracted, and rely on the “instrumentality

rule” to allege claims of civil conspiracy and concert of action

to pierce the corporate veil and reach the remaining Defendants.

(Doc. 1 ¶¶ 254-62; Doc. 36-1 ¶¶ 278-288.) Plaintiffs argue that

their amended complaint “provide[s] greater factual and legal

support” that all defendants “should be held jointly and severally

liable due to their direct involvement on the facts.”

(Doc. 36 ¶ 4.) Plaintiffs’ amended complaint provides additional

alleged facts that “The Citadel Salisbury and Citadel Myers Park

facilities follow common policies and procedures set by

Portopiccolo and Accordius, use vendors chosen by Portopiccolo,

have budgets controlled by Portopiccolo, and use contracts

specified by Portopiccolo.” (Doc. 36-1 ¶ 5; see also id. at ¶¶ 4,

6.) Plaintiffs’ amended complaint also alleges that Defendants

control “74 [corporations] [that] all have the same members, same

managers, and same address,” and, “[o]n information and belief,”

the various corporations “are undercapitalized” and “some or all

have no employees.” (Id. ¶ 226.) Plaintiffs also plead that

“Defendants should be held jointly and severally liable under the

doctrine of civil conspiracy.” (Id. ¶ 285.)

a. Instrumentality Rule

The North Carolina Supreme Court, in Glenn v. Wagner,

329 S.E.2d 326 (N.C. 1985), outlined when a parent corporation can

be liable for the wrongs of another. North Carolina courts “will

disregard the corporate form or ‘pierce the corporate veil,’ and

extend liability for corporate obligations beyond the confines of

a corporation’s separate entity,” whenever necessary to prevent

fraud or achieve equity. Id. at 330 (citation omitted). Under

the mere instrumentality rule, “[a] corporation which exercises

actual control over another, operating the latter as a mere

instrumentality or tool, is liable for the torts of the corporation

thus controlled. In such instances, the separate identities of

parent and subsidiary or affiliated corporations may be

disregarded.” Id. (quoting B–W Acceptance Corp. v. Spencer,

149 S.E.2d 570, 575 (N.C. 1966)). In North Carolina, an entity’s

separate form may be disregarded when (1) one had complete control

of the entity, (2) one used that control to commit fraud or violate

a positive legal duty, and (3) the fraud or violation caused the

injury at issue. United States v. Greer, 383 F. Supp. 2d 861, 867

(W.D.N.C. 2005) (citing Glenn, 329 S.E.2d at 330), aff’d,

182 F. App’x 198 (4th Cir. 2006)).

A corporation’s separate existence is not easily disregarded.

Piercing the corporate veil is a “drastic remedy” that should be

invoked “in only an extreme case where necessary to serve the ends

of justice.” Best Cartage, Inc. v. Stonewall Packaging, LLC,

727 S.E.2d 291, 300 (N.C. Ct. App. 2012) (quoting Dorton v. Dorton,

336 S.E.2d 415, 419 (N.C. Ct. App. 1985)). “Like lightning, it is

rare and severe.” Southern Shores Realty Services, Inc. v. Miller,

796 S.E.2d 340, 351 (N.C. Ct. App. 2017) (quoting State ex rel.

Cooper v. Ridgeway Brands Manufacturing, LLC, 666 S.E,2d 107, 112

(N.C. 2008)).

Several factors are relevant to determine whether a

corporation is so dominated that there is “complete control” to

satisfy the instrumentality rule: (1) “inadequate capitalization”;

(2) failure to comply with corporate formalities; (3) “[c]omplete

domination and control of the corporation so that it has no

independent identity”; and (4) “excessive fragmentation of a

single enterprise into separate corporations.” Glenn,

329 S.E.2d at 330-31. These are merely factors to be considered,

not an exhaustive checklist, as the mere instrumentality rule is

an equitable doctrine:

It should be remembered that the theory of liability

under the instrumentality rule is an equitable doctrine.

Its purpose is to place the burden of the loss upon the

party who should be responsible. Focus is upon reality,

not form, upon the operation of the corporation, and

upon the defendant's relationship to that operation. It

is not the presence or absence of any particular factor

that is determinative. Rather, it is a combination of

factors which, when taken together with an element of

injustice or abuse of corporate privilege, suggest that

the corporate entity attacked had “no separate mind,

will or existence of its own” and was therefore the “mere

instrumentality or tool” of the dominant corporation.

Id. at 332.

A breach of contract can satisfy the “positive legal duty”

requirement of the instrumentality rule. See East Market Street

Square, Inc. v. Tycorp Pizza IV, Inc., 625 S.E.2d 191, 199

(N.C. Ct. App. 2006) (“[W]e consider performance under a contract

to be a positive legal duty, the violation of which constitutes a

clear wrong done to plaintiffs.” (citation omitted)). However,

while fraudulent conduct is not required, the result of such

conduct must be sufficiently “unjust.” See McLesky v. Davis Boat

Works, Inc., 225 F.3d 654 (4th Cir. 2000) (unpublished) (holding

that the “allegation that [owners of corporate defendants]

frustrated [plaintiff’s] contract rights by redistributing profits

of [the corporate defendant for whom plaintiff worked] among the

various corporate defendants” could support piercing the corporate

veil);7 see also Miller, 796 S.E.2d at 354 (court held there was

sufficient evidence from which a reasonable fact finder could

conclude the defendant’s liability was not “simply [based] upon

his exercise of ordinary daily management of the [defendant] LLCs”

as “it appears that he made the decision to intentionally breach

7 While the Fourth Circuit does not accord precedential value to its

unpublished opinions, it has noted that “they are entitled only to the

weight they generate by the persuasiveness of their reasoning.” See

Collins v. Pond Creek Mining Co., 468 F.3d 213, 219 (4th Cir. 2006)

(citation omitted).

the parties’ contracts without input from the other LLC members,

and attempted to use the LLCs to achieve an unjust result”).

Thus, where the claim is based on contract, North Carolina

courts have required that the Plaintiff allege and show that the

corporation was created “for the sole purpose of entering the

contract at issue and at the same time unjustly insulating the

defendant from liability under the contract.” Best Cartage,

727 S.E.2d at 300-01 (citing Tycorp Pizza, 625 S.E.2d 191, and

granting motion to dismiss). For example, where a corporation was

undercapitalized, never generated or received any income, and

lacked the accoutrements of a normal business such as a bank

account and corporate records, and was set up for the sole purpose

of entering into contracts as a shell so there would be no assets

should a judgment be entered, liability is plausible. See NovaFund

Advisors, LLC v. Capitala Group, LLC, 3:18-cv-1023(MPS),

2021 WL 3568892, at *11-13 (D. Conn. Sept. 11, 2021) (denying

motion to dismiss and applying North Carolina law). By comparison,

where the entity engaged in business transactions with other

customers who were not plaintiffs, the standard has not been met.

Dacat, Inc. v. Jones Legacy Transportation, LLC, 844 S.E.2d 625

(N.C. Ct. App. 2020) (unpublished), review denied, 853 S.E.2d 154

(2021) (finding that the defendant corporation “hired and

contracted with various [customers]” did not support piercing the

veil of the LLC as it “show[ed] that [defendant corporation] was

not created for the sole purpose of entering the valid contract

with Plaintiffs”).

In the present case, Plaintiffs allege that Defendants have

excessively fragmented their business entities by “set[ting] up a

convoluted maze of business entities, in an effort to avoid

liability.” (Doc. 36-1 ¶ 55.) Every Defendant limited liability

company is commonly owned by Hyman and Zanziper. (Id. ¶¶ 18-24.)

Hyman and Zanziper are also alleged to exercise complete dominion

and control over The Citadel, the contracting party, by performing

executive functions through the LLCs, which they control, such as

determining the budget and staffing levels, such that the LLCs,

including The Citadel, are mere instrumentalities. (Id. ¶¶ 56-

59.) Hyman and Zanziper are alleged to “disregard[] corporate

separateness” regarding budgeting. (Id. ¶ 28.) Further, Hyman

and Zanziper, through Portopiccolo, provide financial and

accounting control for all nursing homes, including The Citadel.

(Id. ¶¶ 1, 4, 6, 13, 24, 55, 58-59, 226, 287.) Portopiccolo (with

Hyman and Zanziper) is also alleged to control “key aspects of

local nursing home facility operations” such as decisions managing

vendor contracts, hiring vendors, setting wage and pay scales for

workers, hiring contract labor, and dealing with relevant lenders.

(Id. ¶¶ 24, 55, 59.) Plaintiffs further allege that Accordius

provides “management services” for thirty-seven facilities,

including The Citadel, across North Carolina owned by Hyman and

Zanziper (id. ¶¶ 4, 6, 55, 226.), while Portopiccolo handles all

“financial and accounting matters” (id. ¶ 24). Plaintiffs allege

that Hyman, Zanziper, and Portopiccolo are so dominant in the

operations of The Citadel that The Citadel’s facility

administrator is “frozen out of all significant knowledge or

involvement in operational financial matters” in violation of

North Carolina law. (Id. ¶¶ 28, 57, 226.) Hyman and Zanziper

allegedly control the ability to “pay workers, raise wage scales,

add new positions, hire and fire vendors, and have an understanding

of the facility’s revenues and profitability,” which “deprive[s]

[the administrator] of her ability to perform her job.”

(Id. ¶ 59.) Through the exercise of this control, Hyman and

Zanziper allegedly caused the understaffing at The Citadel which

is claimed to have caused Plaintiffs’ injuries. (Id. ¶ 282.)

Additionally, Plaintiffs allege that the various Defendant

LLCs are undercapitalized. The Citadel allegedly does not own the

property where it operates, and it instead pays rent to Salisbury

Two NC Propco, LLC. (Id. ¶¶ 20, 65.) Salisbury Two NC Propco,

LLC operates under “complex loan arrangements” such that the rent

paid by The Citadel ultimately benefits a third party, Oxford

Finance. (Id. at ¶¶ 65-67.) Portopiccolo is also “leveraged and

indebted to private equity lenders” such that it is unable to

afford proper staffing and supply levels. (Id. at ¶¶ 38, 65-67.)

Although the facilities allegedly follow some corporate

formalities “on paper” (id. ¶¶ 65-67), Plaintiffs allege that

Hyman and Zanziper’s actions “reflect[] a misuse of the corporate

form” (id ¶ 55).

Further, Plaintiffs allege that piercing the corporate veil

is equitably necessary. See Best Cartage, 727 S.E.2d at 300.

Plaintiffs assert the impossibility of recovery against The

Citadel for breach of contract due to its undercapitalization.

See Becker v. Graber Builders, Inc., 561 S.E.2d 905

(N.C. Ct. App. 2002) (allowing a complaint to pierce the corporate

veil where a wholly-owned corporation breached its contract, by

failing to install an adequate septic system in violation of state

law, and was administratively dissolved sometime after the

contract was entered into); Postell v. B & D Construction Co.,

411 S.E.2d 413, 419–20 (N.C. Ct. App. 1992) (allowing an employee

to pierce the corporate veil of his corporate employer where the

sole shareholder of the corporation exercised complete control

over the corporation, failed to adequately capitalize the

corporation, and failed to procure workers’ compensation insurance

for the corporation). In other words, Plaintiffs have alleged

they are harmed by the alleged shield of the corporate structure.

See Ridgeway Brands Manufacturing, 666 S.E.2d at 115 (“[I]t would

be inequitable to permit defendants to shelter behind the corporate

identity of the very entity they drained in the course of their

[unlawful] actions.”); but see Best Cartage, 727 S.E.2d at 300-01

(noting that a “breach of [contract], in itself, can[not] amount

to a wrongdoing to meet the second element of the [instrumentality

rule] . . . [as] it does not appear . . . [the individual] created

[the corporation] for the sole purpose of entering the [contract];

and it does not appear that the creation of [the corporation]

somehow unjustly insulates [an individual] from any liability”).

However, at this preliminary pleading stage, it is not

apparent that, even if the first two elements of the standard were

met, piercing the veil is equitably necessary. That likely depends

on whether a class is certified in this case and, if so, its size.

Absent certification, it remains to be demonstrated why pursuing

additional parties, other than those with whom Plaintiffs directly

contracted, would be necessary. Thus, the court will defer ruling

on the viability of Plaintiffs’ claims predicated on the

instrumentality rule pending the resolution of any motion for class

certification. For this reason, discovery directed toward the

issue of veil piercing has not been shown yet to be necessary and

should similarly await the ruling on class certification. Thus,

Defendants’ motion to dismiss the liability claim against

Defendants Salisbury Two NC Propco, LLC; Accordius; Portopiccolo;

Simcha Hyman; and Naftali Zanziper (Doc. 1 ¶¶ 254-262 (Count V of

complaint)) will be denied without prejudice, and Plaintiffs’

motion to amend those same liability claims against those

Defendants (Doc. 36-1 ¶¶ 278-288 (Count IV of proposed amended

complaint)) will be granted, but only insofar as necessary to allow

the parties to work off of a single (amended) complaint. Final

resolution of the claim will be held in abeyance pending the

resolution of a decision on class certification.8

b. Civil Conspiracy

The proposed amended complaint, like the current complaint,

contains allegations of a civil conspiracy as well as a separate

claim for relief based on it (Doc. 36-1 ¶¶ 278-88; Doc. 1 ¶¶ 208,

220, 223, 254-62.)

In North Carolina, “there is not a separate civil action for

civil conspiracy.” Fox v. City of Greensboro, 866 S.E.2d 270, 287

(N.C. Ct. App. 2021) (citation omitted). Rather, a plaintiff can

state a claim for “wrongful overt acts” done in furtherance of a

conspiracy which caused them harm. Id. (citing Shope v. Boyer,

150 S.E.2d 771, 773-74 (N.C. 1966)); Fox v. Wilson, 354 S.E.2d 737,

743 (N.C. Ct. App. 1987) (noting that once the elements of a civil

8 As to Plaintiffs’ contract claims, the complaint names Defendants

Salisbury Two NC Propco, LLC; Accordius; Portopiccolo; Hyman; and

Zanziper. As the North Carolina Supreme Court has explained, “[t]he

general rule is that one who is not a party to a contract may not maintain

an action for its breach.” Matternes v. City of Winston-Salem,

209 S.E.2d 481, 487 (1974). Plaintiffs do not allege that any Defendant

other than The Citadel is a contracting party. (Doc. 1 ¶ 208; Doc. 36-

1 .) However, as discussed above, Plaintiffs have alleged liability of

other Defendants through the instrumentality rule. For the reasons

stated, the court will deny the motion to dismiss the breach of contract

claim against the remaining Defendants and will allow amendment as to

them but will then hold final resolution of whether Plaintiffs will be

permitted to pursue their contract claims against those Defendants in

abeyance until class certification is resolved.

conspiracy are established, “all of the conspirators are liable,

jointly and severally, for the act of any one of them done in

furtherance of the agreement” (citing Burton v. Dixon, 131 S.E.2d

27 (N.C. 1963))); Reid v. Holden, 88 S.E.2d 125, 130-31 (N.C. 1955)

(“It would seem that, as to a conspirator who committed no overt

act resulting in damage, the basis of his liability for the conduct

of his co-conspirators bears close resemblance to the basis of

liability of a principal under the doctrine of respondeat superior

for the torts of his agent.”). To state liability based on a civil

conspiracy, a plaintiff must allege: “(1) an agreement between two

or more individuals; (2) to do an unlawful act or to do an lawful

act in an unlawful way; (3) resulting in injury to plaintiff

inflicted by one or more of the conspirators; and (4) pursuant to

a common scheme.” Fox, 866 S.E.2d at 287 (citation omitted). A

civil conspiracy may be established by circumstantial evidence;

“however, ‘the evidence of the agreement must be sufficient to

create more than a suspicion or conjecture.’” Id. at 287–88

(citing Dickens v. Puryear, 276 S.E.2d 325, 337 (N.C. 1981)).

Here, because the court has found all of Plaintiffs’ tort

claims to be futile, Plaintiffs’ claim for civil conspiracy

necessarily fails. Plaintiffs’ sole claim is for breach of

contract. North Carolina courts have not clearly indicated that

they would recognize a breach of contract as a basis for a civil

conspiracy claim, because to establish that Defendants engaged in

“[a] breach of a contract, nothing else appearing, does not give

rise to an action in tort.” Firemen’s Mutual Insurance Co. v.

High Point Sprinkler Co., 146 S.E.2d 53, 60 (N.C. 1966); see also

Capps v. Harris, No. 5:18-CV-133-FL, 2018 WL 6172517, at *14

(E.D.N.C. Nov. 26, 2018) (“[A] breach of contract is insufficient

to establish [a defendant] engaged in wrongful overt acts.” (citing

Reid, 88 S.E.2d at 130-31)); cf. Superior Performers, Inc. v.

Thornton, No. 1:20-CV-00123, 2021 WL 2156960, at *9 n.10 (M.D.N.C.

May 27, 2021) (referring to a N.C. Business Court decision that

concluded that it is an “open question in North Carolina as to

whether a breach of contract may support a claim for conspiracy.”

(collecting cases)). As a court sitting in diversity, this court

is obliged to follow applicable state law, looking to the law of

the highest court of the state, and should not create new law where

the state has not indicated an intention to do so. See Moore v.

Equitrans, L.P., 27 F.4th 211, 220 (4th Cir. 2022).

Therefore, as Plaintiffs’ complaint fails to plausibly allege

a civil conspiracy, the amended complaint’s civil conspiracy

claims are futile as to Defendants Salisbury Two NC Propco, LLC;

Accordius; Portopiccolo; Simcha Hyman; and Naftali Zanziper.

Thus, Plaintiffs’ claims for civil conspiracy in the complaint

will be dismissed, and the motion to add those claims in the

proposed amended complaint is denied as futile.

8. New Claims

Plaintiffs move to amend their complaint to add claims for

negligence and equitable relief. (Doc. 37 at 6; Doc. 36-1 ¶¶ 289-

297.) Plaintiffs also move to amend to withdraw their claim for

breach of fiduciary duty. (Doc. 37 at 6.) Defendants argue that

Plaintiffs’ new claims are futile because “Plaintiffs have failed

to offer the requisite certification and supporting expert

affidavits as required by North Carolina Rule of Civil Procedure

9(j)” for medical malpractice claims. (Doc. 39 at 7-8.)

Plaintiffs argue that these are not claims of medical negligence;

“[r]ather, this case is about corporate failure to budget for

required staffing.” (Doc. 36-1 ¶ 8; Doc. 43 at 5.)

a. Negligence

The court need not resolve whether Plaintiffs’ negligence

claim is best characterized as a medical malpractice claim or one

for negligent conduct in understaffing because, for the reasons

set forth below, the claim is futile regardless.9

9 To the extent the claims sound in medical malpractice, Defendants

contend that Plaintiffs have failed to comply with Rule 9(j) of the North

Carolina Rules of Civil Procedure, a prerequisite for a medical

negligence claim in state court. See Rule 9(j) (requiring that, prior

to the filing of a medical malpractice complaint in North Carolina, a

plaintiff must certify that an expert has reviewed the medical

malpractice claim and is prepared to testify that the defendant did not

meet the standard of care). Courts have previously held that Rule 9(j)’s

pre-filing certification requirement is “a substantive requirement in

medical malpractice claims.” Boula v. United States, No. 1:11-CV-00366,

2013 WL 1343547, at *2 (M.D.N.C. Apr. 2, 2013). But the Fourth Circuit

has held both that “a Rule 9(j) certification is a mandatory requirement

for a plaintiff in a North Carolina medical malpractice action,”

North Carolina permits a negligence claim regarding a breach

of contract in only four specific circumstances: where the

promisor’s negligent act in performing the contract caused an

injury: (i) “to the person or property of someone other than the

promisee,” (ii) “to property of the promisee other than the

property which was the subject of the contract, or was a personal

injury to the promisee,” (iii) to the property that was the subject

of the contract where the promisor, as a matter of public policy,

bore “the duty to use care in the safeguarding of the property

from harm, as in the case of a common carrier, an innkeeper or

other bailee,” or (iv) that qualified as a willful “injury to or

a conversion of the property of the promisee, which was the subject

of the contract, by the promisor.” North Carolina State Ports

Littlepaige v. United States, 528 F. App’x 289, 292-93 (4th Cir. 2013)

(unpublished), and more recently that an analogous state-law pleading

requirement did not apply in federal court, Pledger v. Lynch, 5 F.4th

511, 517–24 (4th Cir. 2021) (concluding that Federal Rules of Civil

Procedure displace West Virginia’s certification requirement and deeming

the latter inapplicable to claim under Federal Tort Claims Act).

Following Pledger, federal courts in North Carolina have recently

rejected Rule 9(j) noncompliance as a basis for dismissing medical

malpractice claims under North Carolina law. See Saylon v. United

States, No. 5:20CV176, 2021 WL 3160425, at *3–4 (E.D.N.C. July 26, 2021);

Richardson v. Wellpath Health Care, No. 1:20CV777, 2021 WL 5235334, at

*7, *11 (M.D.N.C. Nov. 10, 2021) (recommending against dismissal of the

plaintiff’s medical malpractice case, in part, because Pledger has

“rendered Rule 9(j) a nullity in federal court”); Vickers v. United

States, No. 1:20-CV-00092-MR-WCM, 2021 WL 5769991, *8-10 (W.D.N.C. Dec.

6, 2021). Cases involving diversity jurisdiction and supplemental

jurisdiction have been held to also be within Pledger’s purview. See

Johnson v. W. Virginia Univ. Bd. of Governors, No. 2:21-CV-00380, 2022

WL 908496, at *13 (S.D.W. Va. Mar. 28, 2022) (“Simply put, the conflict

between the pre-suit notice and the Federal Rules of Civil Procedure

does not dematerialize in diversity actions. Pledger applies just the

same.” (citation omitted)).

Authority v. Lloyd A. Fry Roofing Co., 240 S.E.2d 345, 350-51

(N.C. 1978), rejected in part on other grounds by Trustees of Rowan

Technical College v. J. Hyatt Hammond Associates, Inc.,

328 S.E.2d 274, 281 (N.C. 1985) (emphasis added); see

Kaleel Builders, Inc. v. Ashby, 587 S.E.2d 470, 476

(N.C. Ct. App. 2003) (“[North Carolina courts] acknowledge no

negligence claim where all rights and remedies have been set forth

in the contractual relationship. North Carolina case law on this

issue is clear and long standing.”).

None of those circumstances applies here, as Plaintiffs have

expressly disavowed any claim for personal injury. (See Doc 36-

1 ¶ 8 (“The Plaintiffs do not at this time bring any claims

for . . . personal injury.”); Doc. 30 at 2 (“There is no

claim . . . for personal injury.”).) Therefore, Plaintiffs’ claim

is best characterized as one for breach of contract, and

Plaintiffs’ motion to amend to add a claim of negligence will be

denied as futile.

b. Equitable Relief

Plaintiffs’ amended complaint also invokes the federal

Declaratory Judgment Act, 28 U.S.C. § 2201, to “plead that the

Court declare the respective rights and obligations of the parties

with regard to the applicable contract provisions alleged herein.”

(Doc. 36-1 ¶ 297.)

The Declaratory Judgment Act permits a federal court to

“declare the rights and other legal relations of any interested

party seeking such declaration, whether or not further relief is

or could be sought.” 28 U.S.C. § 2201(a). The Act “confer[s] on

federal courts unique and substantial discretion in deciding

whether to declare the rights of litigants.” Wilton v. Seven Falls

Co., 515 U.S. 277, 286 (1995); United Capitol Insurance Co. v.

Kapiloff, 155 F.3d 488, 493 (4th Cir. 1998) (“The Declaratory

Judgment Act, 28 U.S.C. § 2201(a), provides that district courts

‘may declare’ the rights of interested parties. This permissive

language has long been interpreted to provide discretionary

authority to district courts to hear declaratory judgment

cases.”). District courts have “great latitude” in deciding

whether to exercise jurisdiction in a declaratory judgment action.

See Aetna Casualty & Surety Co. v. Ind-Com Electric Co.,

139 F.3d 419, 422 (4th Cir. 1998) (per curiam).

The Fourth Circuit has enumerated several factors that a

district court should consider in determining whether to exercise

its discretion to entertain a declaratory judgment action. See

id. These include whether “the declaratory relief sought: (1)

will serve a useful purpose in clarifying and settling the legal

relations in issue, and (2) will terminate and afford relief from

the uncertainty, insecurity, and controversy giving rise to the

proceeding.” Id. (citation omitted). Furthermore, the district

court should consider (3) principles of federalism, efficiency,

comity, and procedural fencing, id. at 423, and (4) whether

“allowing [the] case to go forward would produce piecemeal

litigation,” id. at 424.10

After fully considering these factors, the court declines to

exercise its discretion here. As to the first two factors, a

declaration in this case would not serve a “useful purpose” as, in

denying Defendants’ motion to dismiss as to the breach of contract

claim, the court has already held that either an express or

implied-in-fact contract exists between the residents and The

Citadel. Additionally, any declaratory judgment would not

“terminate and afford relief from the uncertainty, insecurity, and

controversy giving rise to the proceeding.” The third and fourth

factors are less relevant. There is neither a pending state court

proceeding for considerations of federalism or comity nor any

indication that one party is engaging in procedural fencing, e.g.,

a race for res judicata, or risk of piecemeal litigation from

different courts considering the same issue. See Gannett Co. v.

Clark Construction Group, Inc., 286 F.3d 737, 744 (4th Cir. 2002)

(“Piecemeal litigation occurs when different tribunals consider

10 Additional factors exist when there are parallel state court

proceedings, which are not present here. See Nautilus Ins. Co. v.

Winchester Homes, Inc., 15 F.3d 371, 376-77 (4th Cir. 1994), abrogated

in part on other grounds by Wilton v. Seven Falls Co., 515 U.S. 277,

289–90 (1995). While the lack of a state court proceeding is not

dispositive, it remains a “significant factor” in the determination of

whether to hear a declaratory judgment action. See Ind-Com,

139 F.3d at 423.

the same issue, thereby duplicating efforts and possibly reaching

different results.” (citation omitted)).

For these reasons, Plaintiffs’ motion to amend the complaint

to assert a request for declaratory relief will be denied as

futile.

9. Prejudice

Defendants contend that Plaintiffs’ amended complaint should

be denied as unduly prejudicial as it was made “after [the] motion

to dismiss was filed,” Plaintiffs were already aware of their “new”

facts prior to filing their initial complaint, and “expanding the

class allegations to another facility and then to all North

Carolina facilities is being done for no other reason than to

prejudicially drive up Defendants’ cost of litigati[on].”

(Doc. 39 at 15-17.) Plaintiffs do not respond to this argument.

(See Doc. 43.)

The timing and changes in Plaintiffs’ proposed amended

complaint appear to be, at least in part, an attempt to circumvent

Defendants’ pending motion to dismiss and has complicated the

court’s resolution of the pending motions. See Googerdy v.

North Carolina Agricultural & Technical State University,

386 F. Supp. 2d 618, 624 (M.D.N.C. 2005) (denying a motion to amend

as prejudicial when the “proposed amendment” was “brought solely

to circumvent Defendant’s motion to dismiss.” (citing Johnson v.

Oroweat Foods Co., 785 F.2d 503, 509 (4th Cir. 1986)). Indeed,

Plaintiffs filed their motion to amend their complaint a mere

fifteen days after the motion to dismiss was fully briefed and

sought to add facts they were already aware of to shore up their

instrumentality rule allegations, including that “some or all” of

the LLCs controlled by Hyman and Zanziper have “no employees” and

The Citadel is undercapitalized. (Doc. 36-1 ¶ 226.) Further,

this litigation against the Defendants had a prior iteration, until

it was voluntarily dismissed on March 18, 2021, following

“[e]xtensive discovery”; Plaintiffs filed this litigation two

months later. (See Doc 25. at 1-2, 2 n.1; see also Doc. 30 at 5

n.2 (“Plaintiffs are hopeful that the [significant amount of work

and] discovery from [the previous litigation] will assist to

expedite these proceedings.”).)11 Plaintiffs also made significant

changes to their claims, withdrawing their fiduciary duty claim

11 Despite this prior litigation and “extensive” and “significant”

discovery, many of Plaintiffs’ allegations are based on “information and

belief.” A complaint’s conclusory allegations based solely “upon

information and belief” are generally “insufficient to defeat a motion

to dismiss.” Harman v. Unisys Corp., 356 F. App’x 638, 640–41

(4th Cir. 2009) (unpublished) (citing Twombly, 550 U.S. at 555)); In re

Darvocet, Darvon, & Propoxyphene Prod. Liab. Litig., 756 F.3d 917, 931

(6th Cir. 2014) (“To survive a motion to dismiss, a complaint must plead

facts that create a plausible inference of wrongdoing. The mere fact

that someone believes something to be true does not create a plausible

inference that it is true.” (citation omitted)). However, “the Twombly

plausibility standard . . . does not prevent a plaintiff from pleading

facts alleged ‘upon information and belief’ where the facts are

peculiarly within the possession and control of the defendant, or where

the belief is based on factual information that makes the inference of

culpability plausible.” Arista Recs., LLC v. Doe 3, 604 F.3d 110, 120

(2d Cir. 2010) (citation omitted); Innova Hosp. San Antonio, Ltd. P’ship

v. Blue Cross & Blue Shield of Georgia, Inc., 892 F.3d 719, 730 (5th

Cir. 2018) (same).

and adding claims for negligence and a request for a declaratory

judgment. (Compare Doc. 1 ¶¶ 207-262 with Doc. 36-1 ¶¶ 237-297.)

However, as the court is nevertheless entertaining Defendants’

motion to dismiss, Defendants are not unduly prejudiced either by

a delay or through the “time and expense of fully briefing a motion

to dismiss.” See Cash v. Lees-McRae College, Inc., No. 1:18-CV-

00052-MR-WCM, 2019 WL 276842, at *3 (W.D.N.C. Jan. 22, 2019),

aff’d, 811 F. App’x 190 (4th Cir. 2020) (denying leave to amend

for undue prejudice where “allow[ing] the Plaintiffs to amend their

Complaint at this stage of the proceedings . . . would not only

prejudice the Defendants, who have expended the time and expense

of fully briefing a motion to dismiss, but would also encourage

dilatory practices on the part of plaintiffs in delaying motions

for leave to amend until after they have the benefit of a

Magistrate Judge’s opinion” (citation omitted)). Additionally,

the court has denied expansion of the litigation to include joinder

of Ms. Kilgo and Ms. Lee as Plaintiffs, and Myers Park and Myers

Park Propco, LLC as Defendants, under Rule 20. On the whole,

therefore, consideration of Plaintiffs’ motion to amend their

complaint does not unduly prejudice Defendants.

B. Motion to Strike

Defendants move to strike various allegations in Plaintiffs’

complaint pursuant to Federal Rule of Civil Procedure 12(f).

(Docs. 28, 29.) Specifically, Defendants move to strike the

following: (1) “inflammatory terms” such as “cut-rate medical

supplies,” “reckless cost-cutting measures,” and “upstart [nursing

home] chain”; (2) allegations against a non-party, Genesis; (3)

allegations “concern[ing] standard of care violations”; and (4)

“allegations pertain[ing] to marketing materials.” (Doc. 29 4-

5.) In response, Plaintiffs argue that “[t]here is nothing

inflammatory, scandalous or otherwise strike-able about the

allegations in the Complaint.”12 (Doc. 32 at 5-9.) Defendants did

not file a reply. (See Doc. 35.)

Federal Rule of Civil Procedure 12(f) authorizes the court to

“strike from a pleading an insufficient defense or any redundant,

immaterial, impertinent, or scandalous matter.” Such motions act

to prevent the litigation of “unnecessary issues.” Simaan, Inc.

v. BP Products North America, Inc., 395 F. Supp. 2d 271, 278

(M.D.N.C. 2005). A party moving to strike a defense under Rule

12(f) must make a showing of prejudice. Id. “[T]o survive a

motion to strike, a defendant must offer more than a bare-bones

conclusory allegation which simply names a legal theory but does

not indicate how the theory is connected to the case at hand.”

Villa v. Ally Financial, Inc., No. 1:13CV953, 2014 WL 800450, at

*2 (M.D.N.C. Feb. 28, 2014) (citation omitted). Whether to grant

12 As discussed above, despite this contention, Plaintiffs’ amended

complaint has removed some of the language Defendants label as

“inflammatory.”

or deny a motion to strike is discretionary with the district

court. United States v. Ancient Coin Collectors Guild,

899 F.3d 295, 324 (4th Cir. 2018); Ferrellgas, L.P. v. Best Choice

Products a/k/a Sky Billiards, Inc., No. 1:16CV259, 2016 WL 4539220,

at *2 (M.D.N.C. Aug. 30, 2016).

Here, the dispute over many of the allegations deemed

offensive has been resolved by the court’s grant of Defendants’

motion to dismiss. Even if many of the alleged “inflammatory

terms” and facts surrounding Genesis were removed, dismissal of

Plaintiffs’ breach of contract claim would not be warranted.

Additionally, the court has already determined that the

allegations in the purported “standard of care violations” may

demonstrate breach of contract. See supra. Finally, the

“allegations pertain[ing] to marketing materials” are only

relevant to Plaintiffs’ UDTPA claim, which the court is dismissing.

Accordingly, the motion to strike is denied as moot.

III. CONCLUSION

For the reasons stated,

IT IS ORDERED that Plaintiffs’ motion to amend (Doc. 36) is

GRANTED in part and DENIED in part as follows:

The motion is GRANTED as to Resident Plaintiffs’ breach

of contract claim (Count I) of the proposed amended complaint;

The motion is DENIED as futile as to joinder to add Ms.

Kilgo and Ms. Lee as Plaintiffs, and Myers Park and Myers

Park Propco, LLC as Defendants, and DENIED as futile as to

Counts II (Unfair and Deceptive Trade Practices), III

(Negligent Infliction of Severe Emotional Distress),

V (Negligence), VI (Equitable Relief), and IV (as to civil

conspiracy), against all Defendants, as alleged in the

proposed amended complaint; and

The motion is GRANTED as to allegations of liability

against all Defendants under the instrumentality rule

(Count IV) except that as to this count Plaintiffs will be

permitted only to file the amended complaint (deleting

reference to civil conspiracy) and discovery on any claim

seeking to pierce the corporate structure of any Defendant as

well as this court’s final determination on whether Count IV

can proceed shall be STAYED pending resolution of the

determination of class certification.

IT IS FURTHER ORDERED that Defendants’ motion to dismiss the

complaint (Doc. 24) is GRANTED in part and DENIED in part as

follows:

The motion is GRANTED as to Count II (Unfair and

Deceptive Trade Practices) and Count IV (Negligent Infliction

of Severe Emotional Distress) of the complaint, which claims

are DISMISSED against all Defendants;

The motion is DENIED as to Resident Plaintiffs’ breach

of contract claim (Count I); and DENIED AS MOOT as to Sponsor

Plaintiffs’ breach of fiduciary duty claim (Count III), which

Plaintiffs have withdrawn, and DENIED as to the allegations

of liability under the instrumentality rule (Count V), which

Plaintiffs have amended and the court has allowed subject to

the limitations noted herein.

IT IS FURTHER ORDERED that the motion to stay (Doc. 26) is

WITHDRAWN and DENIED AS MOOT;

IT IS FURTHER ORDERED that the motion to strike (Doc. 28) is

DENIED AS MOOT.

IT IS FURTHER ORDERED that the prior stay of consideration of

Plaintiffs’ class certification (Doc. 23) is LIFTED and Plaintiffs

shall have 30 days within which to file their updated briefing in

support of their motion to certify the class. Defendants’ response

briefs and Plaintiffs’ reply briefs shall be filed as provided in

the court’s Local Rules.

/s/ Thomas D. Schroeder

United States District Judge

May 25, 2022